During school, physical therapists receive extensive training in clinical reasoning, patient safety, body mechanics, caregiver education, and other essential skills. But one thing we don’t learn much about is business. Most of us receive very little training on practice management, and we certainly don’t learn anything about how to set our prices.
Pricing is a complex issue in PT. It’s difficult to know exactly how much we should charge for our services. Price too low, and we may have trouble keeping our doors open—or even skew patients’ perceptions of the value we provide. Price too high, and we might not attract enough business to cover our costs—or we may end up affecting patient satisfaction and thus, our reputations.
So, how do we find that pricing sweet spot? How do we set our fee schedules—the established rates we charge for our services—in a manner that reflects our skills and value? After all, a fee schedule contains individual charges for individual billing codes, and our documentation must always support the services and corresponding charges that we bill. But ultimately, it’s up to us to set the prices for physical therapy units in our clinics (i.e., come up with the amount we will charge for each service code).
Here are some tips to help you set rates that feel right for your unique circumstances.
1. Understand how your practice model affects payments.
How you price your services will vary depending on how many (if any) cash-pay patients you see at your practice. If you operate solely on a cash basis, you’ll have much more leeway with how you set your rates.
But most clinics rely on third-party payers, at least to a certain degree. And like it or not, if you’re relying on insurance reimbursements to keep your clinic’s doors open, you have to play by payer rules to a certain extent. That means you need to consider their reimbursement rates when you set your fee schedule.
2. Stick to a single fee schedule.
If you base your rates on Medicare’s pre-set fee schedule, you won’t always maximize reimbursements. It’s mighty tempting to create separate fee schedules for each insurance payer so you always get the highest possible payments, but that just winds up taking tons of time—not to mention creating countless billing headaches—and doing so usually won’t make an appreciable improvement in your revenue.
The APTA recommends sticking to a single fee schedule, but also offering discounts based on negotiated contracts with payers. The same would go for self-pay patients; rather than setting a separate fee schedule for those patients paying out-of-pocket for your services, it is wise to simply offer discounts. (Just keep in mind that there are rules and regulations around discounts, particularly for Medicare patients.)
3. Examine your local market for clues.
If all the other physical therapists in your area are charging half of what you are—or double, for that matter—it’s time to rethink your payment structure. Understand your unique value, of course, but don’t over or under-inflate your rates so much that patients wonder why you’re so pricey—or why you’re priced at a bargain-basement rate. One of the easiest ways to determine what other people are charging is to simply call and ask. Tell them you’re updating your fee schedule and wondering what they charge for various services. Then, offer to return the favor when they update their own fee schedules.
If you’re cash-based and are competing against other local cash-pay PT clinics, you might be considering a sliding-scale rate. Resist the temptation! Sliding-scale payment systems are difficult to enforce and can cause major billing headaches. Plus, patients may talk to one another and start to resent what they perceive as unfair treatment. Instead, establish set low-income discount rates that are standardized across the board.
4. Consider your niche.
You might be an extremely specialized PT, offering high-end services to professional dance troupes. Or, you might be a sports expert who specializes in treating world-class cyclists. If you’re extremely confident in your skills, and there’s a high demand for your services, then there’s no reason not to charge premium rates.
However, as mentioned above, your practice location also plays into how much you can actually leverage your niche. Even if you have the skills to treat pro athletes, if you relocate to an underserved area, you will likely run into trouble charging premium rates—no matter how skilled you are. One way to continue serving high-end clientele if you do relocate is to offer niche telehealth PT consultations.
At the end of the day, if you want to have a healthy practice, you need to charge enough for your services that you don’t have to cram unreasonable numbers of patients in the door to maintain your bottom line. But you also need to keep other factors in mind—including your practice location, clientele, payer mix, and niche. Rates are fluid, and you’ll need to update your fee schedule regularly. But as long as you keep pace with market rates and understand your unique value as a PT, you’ll be able to run a successful private practice.
Meredith Castin, PT, DPT, is the founder of The Non-Clinical PT, a career development resource designed to help physical, occupational, and speech therapy professionals leverage their degrees in non-clinical ways.